sorry, your right and I'll send Flynn (the developer of this theme) a note
To Upgrade the theme
1) download the new version of the theme
2) unzip the file)
3) copy any images you have added in a prior release to the 'images/header' folder
4) if you have added any other files (templates, icons) copy them to the same folder in the new version
5) Make sure the Atahualpa folder is named with the version number i.e atahualpa344
6) upload the folder to the 'wordpress/wp-contents/themes' folder at your host
7) get on the backend of your site and go to Dashboard->Appearances->Themes and activate the new version
8) all done
You can now check out the new version. If something is wrong, you can simply go back to Dashboard->Appearances->Themes and re-activate the prior version.
p.s. I changed the title of this thread incase someone else needs this info before the next release when hopefully the readme till have this in it.